London close: FTSE gains as energy firms rally amid higher oil prices

(Sharecast News) - London stocks ended firmly in the black on Tuesday, with energy firms pacing the gains amid higher oil prices, as investors continued to mull mixed messages regarding the conflict in the Middle East. The FTSE 100 closed up 0.7% at 9,965.16. Brent crude was up 4.9% at $104.84 a barrel and West Texas Intermediate was 5.6% higher at $93.23.

All eyes remained firmly on developments in the Middle East after Donald Trump said on Monday that the US was postponing "any and all" military strikes against Iranian energy infrastructure following "very good and productive conversations" about a resolution to the hostilities in the Middle East.

Iran subsequently denied any talks had taken place.

Trump's comments came just a day after the US president threatened to "obliterate" Iran's power plants if it did not reopen the Strait of Hormuz within 48 hours.

Dan Coatsworth, head of markets at AJ Bell, said the positive tone "implies some faith on the part of markets that an off-ramp can be found for all parties in the Iran conflict before the economic damage becomes too acute".

"For now, the fighting continues and that's kept oil prices in alarm bell territory above $100 per barrel and natural gas elevated too. Though in both cases prices are below their recent highs," he said. "Disputed claims on both sides means we're now in a waiting game to see evidence of tangible mediation efforts to end the war. The whiff of anything positive or negative is likely to have an outsized impact on markets and the prevailing mood remaining hesitant and tetchy."

On home shores, a survey showed business growth slowed in March as costs rose at the fastest pace since the sterling crisis in 1992 due to the war in Iran.

The S&P Global flash composite purchasing managers' index fell to 51.0 from 53.7 in February. The reading was above the 50.0 mark that separates contraction from expansion for the 11th month in a row, but pointed to the slowest output expansion since last September.

It was also below economists' expectations for a reading of 52.8.

The manufacturing output index fell to 50.1 in March from 52.5 the month before, hitting a six-month low. Meanwhile, the services PMI business activity index printed at 51.2, down from February's 53.9 and also a six-month low.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The war in the Middle East has hit the UK economy in March, stalling growth while driving inflation sharply higher.

"Output growth across manufacturing and services has slowed to a crawl as companies blamed lost business directly on the events in the Middle East, whether through heightened risk aversion among customers, surging price pressures, higher interest rates, or via travel and supply chain disruptions.

"Inflationary pressures have surged higher on the back of rising energy prices and fractured supply chains. The acceleration in cost growth in the manufacturing sector was especially severe, being the sharpest since the depreciation of sterling following Black Wednesday in 1992."

Williamson said the full impact on inflation and economic growth depends not just on the duration of the war but also the length of disruptions to energy markets and shipping, "though March's PMI numbers clearly underscore how downside growth risks and upside inflation risks have already materialised".

"The Bank of England faces a challenging period where it will need to balance these growth and inflation risks when setting policy, seeking to dampen the potential for the inflation spike to become more engrained while ensuring a hawkish interest rate outlook does not exacerbate downturn risks."

Separately, the latest Distributive Trades survey from the Confederation of British Industry showed that retail sales slid in March at the fastest pace since April 2020.

The CBI's retail sales volume balance was -52, down from -43 in February. Retailers said weak economic conditions continued to weigh on household spending, with subdued activity also evident across the broader distribution sector.

In equity markets, BP and Shell gushed higher amid firmer oil prices, along with Diversified Energy and Harbour Energy.

3i Group also rallied as Citi reiterated its 'buy' recommendation on the shares and opened an 'upside catalyst watch'.

On the downside, Bellway tumbled as it posted a rise in first-half profit and completions and lifted its full-year volume output guidance, but trimmed its operating margin expectations for the year. It also noted that the ongoing conflict in the Middle East had led to the return of volatility in the mortgage market.

Other housebuilders followed suit, with Persimmon, Berkeley and Barratt Redrow also weaker.

Trustpilot tanked after Advent Global Opportunities sold just over 21.59m shares in the company in a placing.

Bytes Technology tumbled as it said annual earnings would be in line with expectations after its performance strengthened in the second half, but that it expects 2027 operating profit to be broadly flat on the back of higher costs after the completion of strategic projects.

B&Q-owner Kingfisher edged lower as it forecast further growth despite a "mixed" consumer environment, posting a jump in full-year profits.

Experian and Sage Group lost ground after Anthropic said its Claude AI agent can now use a person's computer to complete tasks.

Market Movers

FTSE 100 (UKX) 9,965.16 0.72% FTSE 250 (MCX) 21,135.77 -0.52% techMARK (TASX) 5,575.03 0.06%

FTSE 100 - Risers

Smurfit Westrock (DI) (SWR) 2,972.00p 4.17% BP (BP.) 557.50p 3.51% BT Group (BT.A) 206.60p 3.46% Shell (SHEL) 3,460.00p 3.15% CRH (CDI) (CRH) 8,004.00p 2.93% Convatec Group (CTEC) 223.40p 2.67% Glencore (GLEN) 527.90p 2.39% Games Workshop Group (GAW) 18,100.00p 2.20% Vodafone Group (VOD) 110.10p 2.18% 3i Group (III) 2,750.00p 2.15%

FTSE 100 - Fallers

Persimmon (PSN) 1,104.50p -3.33% JD Sports Fashion (JD.) 67.30p -2.94% Experian (EXPN) 2,566.00p -2.66% Kingfisher (KGF) 289.60p -2.29% Babcock International Group (BAB) 1,242.00p -2.20% Metlen Energy & Metals (MTLN) 34.20p -2.01% Haleon (HLN) 359.10p -1.78% Berkeley Group Holdings (The) (BKG) 3,424.00p -1.72% The Sage Group (SGE) 804.60p -1.71% Barratt Redrow (BTRW) 263.00p -1.54%

FTSE 250 - Risers

Diversified Energy Company (DI) (DEC) 1,270.00p 8.73% Applied Nutrition (APN) 215.00p 4.88% Harbour Energy (HBR) 294.00p 3.96% Endeavour Mining (EDV) 4,128.00p 3.36% Johnson Matthey (JMAT) 1,860.00p 2.65% BlackRock World Mining Trust (BRWM) 841.00p 2.56% Hochschild Mining (HOC) 571.00p 2.51% Pan African Resources (PAF) 128.60p 2.39% RHI Magnesita N.V. (DI) (RHIM) 2,425.00p 2.11% Ithaca Energy (ITH) 249.00p 2.05%

FTSE 250 - Fallers

Bellway (BWY) 1,763.00p -17.54% Trustpilot Group (TRST) 196.00p -16.88% Bytes Technology Group (BYIT) 253.60p -15.35% Gamma Communications (GAMA) 733.00p -10.94% Aston Martin Lagonda Global Holdings (AML) 37.44p -6.68% Raspberry PI Holdings (RPI) 302.00p -5.74% B&M European Value Retail (BME) 156.50p -4.28% Softcat (SCT) 1,183.00p -3.82% Kainos Group (KNOS) 707.00p -3.48% Oakley Capital Investments Limited (DI) (OCI) 444.00p -3.48%